How Will Retail Redefine Itself in the ’20s?
One positive phenomenon of the Covid era has been accelerated digital transformation in traditional sectors. This could be a blessing in disguise, as sectors like retail could use a jumpstart. After “retailpocalyse” rocked the 2010s, what will a redefined retail industry look like in the ’20s?
Covid-inflicted accelerated transformation is hitting several retail sub-categories and adjacent sectors. For example, consumers have developed a taste for e-commerce in greater numbers, which has forced new habits that could persist beyond the pandemic. We can’t unring that bell.
To put some numbers against that claim, e-commerce in 2020 grew 32% year-over-year as of Q3 2020. After hovering around 10% of U.S. consumer spending for the past decade, it shot up to 14% in a matter of months. The question is if it stays there or drops back down.
For the sake of Street Fight’s local-centric focus, we’ll also say that e-commerce transcends the traditional definition of ordering things online to be shipped. We’re using the term to also reference any locally fulfilled transaction, including the inflections in order-ahead and curbside pickup.
E-commerce’s long-term prevalence will obviously impact the fate of physical retail. So, if we envision for the sake of argument that e-commerce endures at current spending levels, how will physical stores need to evolve to live in that world?
This question was inspired by a recent piece in Fast Company. The thought is that, if e-commerce continues to siphon off retail spending in a post-Covid world, how can physical stores reposition themselves in that value chain? One potential answer is to be brand experience hubs.
In other words, though consumers have gotten savvy with, and interested in, online ordering for several product categories, there’s still a need for upper-funnel branding and awareness marketing. That’s where stores can play a role as discovery engines for products or a given brand’s ethos.
This “showrooming” model isn’t new, which means there are plenty of examples. Apple is probably the best model of an experiential retail play. Other examples go back further, including Sharper Image. And the DTC world has been all over this, including companies like Away and Casper.
Meanwhile, we’re seeing new twists on the idea. Nike recently launched an immersive in-store activation that simulates an outdoor expedition of Smith Rock State Park in Oregon (see video below). It all takes place within a terrarium that contains Nike products and is social-distancing-friendly.
Swank and small business
Some of the above seems likely. But questions remain. For example, how will store owners and operators justify swanky retail space that’s more about product exposure than a ringing cash register? Attribution data will need to play a key role, which could rely on the location intelligence sector.
Another question is how this hits Main Street. The examples above are large brands, which need to establish and reinforce narratives on a broad scale. But what about SMBs? Will this trend trickle down to them, as often happens with emerging tech & media trends? The answer is mixed.
For one, the experiential brand hub model applies to consumer goods, as opposed to prevalent SMB verticals like restaurants, salons, and professional services. Your dentist doesn’t need a Sharper Image-esque store (although Invisalign may). Even retail categories like hardware don’t jibe.
So, where does the future of retail apply to SMBs? It could gain momentum for considered purchases like cars. Auto dealers are in the meaty mid-market segment (the “M” in SMB), which could be compelled by Carvana-like fulfillment models in tandem with local showrooms. Also look to Tesla as a model.
Meanwhile, retail’s looming redefinition is a thought exercise for anyone in the broader ecosystem to mentally prepare. Like everything else at the moment, outcomes are uncertain. But clues for the next decade’s retail orientation could start to materialize as the world recovers in 2021.